House price falls warns Barratt

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by Kay Murchie

The recent problems at Northern Rock and the credit squeeze will push down demand for new homes and could result in price falls, warned Barratt’s, Britain’s biggest housebuilder.

Barratt’s chief executive, Mark Clare, commented that they have noted that mortgage lenders are much more cautious. Lenders are tightening their lending resulting in a huge shock to the market. Mr Clare added that demand is still far exceeding supply and in the short-term, it is inevitable that there will be a weakening of the market.

The chief executive added that sales were weaker than usual over the summer period and sales over the last 11 weeks are below last year’s exceptional highs.

Five interest-rate increases in the last year have also had an effect, Mr Clare said but the major effects were on secondary locations - apartment blocks in the less attractive parts of towns. Prime locations such as London and superior houses are still in demand.

Mr Clare concluded that it is inevitable that a downward pressure on volumes and price inflation will be noted in the short-term. Northern Rock was one of the most competitive lenders in the mortgage market, as a provider. Others will take its place and ultimately they will start competing with each other again.

On a positive note, Barratt’s £2.2 billion takeover of Wilson Bowden in early 2007 meant that the combined companies’ forward sales of homes were 15% ahead at the end of June at a high of £1.23 billion.